Corporate Vision on Business with Japan

Kan Trakulhoon

President & CEO, SCG

Invest Japan Symposium by JETRO&JSCCIB

27 May 2015, 13:30 – 16:30

Dusit Thani Bangkok

Agenda

SCG Corporate Growth Strategies

Collaborative relationship with Japanese partners

Doing Business with Japan in the future

SCG’s view on investing in Japan

2

Agenda

SCG Corporate Growth Strategies

Collaborative relationship with Japanese partners

Doing Business with Japan in the future

SCG’s view on investing in Japan

3

SCG Snapshot 2013 -

No

w

Chemicals

1913

1938

1976

Cement

Building Materials

Paper

1983

1998

Distribution

Cement-Building Materials Chemicals Paper

270+ companies Subsidiaries and Associates

480+ bn THB Consolidated Revenue

100+ bn THB ASEAN Revenue

51,000+ / 15,000+ people Total / Overseas Staffs

4

SCG’s Vision:

To become

ASEAN Sustainable

Business Leader

“By the year 2015, SCG will be

well recognized as an

innovative workplace of choice,

and a role model in

corporate governance and

sustainable development….”

SCG’s Vision & Strategies

5

Go Regional

Population of 600 M

GDP growth 5-6%

Familiar market Low capita consumption of basic products

ASEAN

6

ASEAN Attractiveness

ASEAN and the Global Economy (economic size)

$4,901bn

Japan $1,222bn

Korea

$9,181bn

China

$2,300bn

ASEAN

$1,505

AUS

$16,800bn

US

$17,372bn

EU

$1,871bn

India

Source: IMF World Economic Outlook, April 2014

7

- Packaging

- Chemicals

Total Assets $1,225 Mil (39,857 MB)

Total Operation 6,935 staffs

Total Assets $21 Mil (674 MB)

Total Operation 140 staffs

Total Assets $217 Mil (7,070 MB)

Total Operation 1,080 staffs

- Paper

- Paper & Packaging

- Chemicals

- Cement-Building Materials

- Cement-Building Materials - Cement-Building Materials

- Cement-Building Materials

- Cement-Building Materials

- Cement-Building Materials - Packaging

Malaysia & Singapore (1996) Indonesia

(1994)

Philippines (1994)

Vietnam (1992)

Laos & Cambodia (1992)

Myanmar (1994)

Total Assets $264 Mil (8,686 MB)

Total Operation 471 staffs

Total Assets $673 Mil (21,902 MB)

Total Operation 6,496 staffs Total Assets $236Mil (7,680 MB)

Total Operation 184 staffs

Current update of SCG Presence in ASEAN

8

ASEAN assets = $2.7 billion (88,960 MB)

(19% of total assets)

International Staff = 15,744 persons

(31% of total staff)

Note: as of Mar/15

ASEAN Operations - subsidiaries outside Thailand Export Destinations - from Thai subsidiaries

ASEAN is becoming more important to SCG

9

SCG Current Workforce SCG Manpower: 51,100* persons

SCG International Staff: 307 persons (2% of OV Operations)

SCG Staff in Overseas Operations: 15,437 persons

As of Mar 2015 *Consolidated basis

(Regional staff: 30% of total staff)

Indonesia 6,935 Philippines 1,080 Myanmar 184 Vietnam 6,496 Cambodia 440 Others 302

SCG Staff in Thailand Operations: 35,663 persons

R&D and Product Design Team : 1,519 persons (PhD 104)

*Included Norner, Norway (SCG Chemicals) Norner Employee are 50 persons (45 R&D

related persons with PhD 10 Persons)

10

Increase customer satisfaction

Differentiate from the competitors

Compete on Value to Customers, not price

Focus on commercialization

Commitment in R&D

HVA Products & Services HighValueAdded

11

Cement &

Building Materials

HVA: gearing toward more value to customer

HVA = High value added products and services 5-10% higher margin

Performance, Solution Provider, Service & Design, and Branding

“Less paper-Same strength”

“Up to 25% lighter”

Large format ceramics

“ Lightweight packaging solution”

“Roofing solution”

Paper Chemicals

12

R&D and Innovation: R&D Spending by Countries

13

2. R&D Spending, 3. R&D product and design team

Moving toward HVA, especially in Thailand

14

14

1. HVA’s Revenue from Sales

Agenda

SCG Corporate Growth Strategies

Collaborative relationship with Japanese partners

Doing Business with Japan in the future

SCG’s view on investing in Japan

15

1978

1981-

1992

1995-

1999

2002

2012-

2013 Nippon Paper

Industries NP Trading

Aisin Takaoka

The Furukawa Battery

Investment

Paper

Chemicals

Building Materials

Mitsubishi Rayon Mitsubishi Corp.

Mitsiam Intl.

Toyota Tsusho Aisin Seiki

Kayaba Industry

Asahi Glass

Strong Partnership with Japanese Companies

More than 30 years of SCG-Japanese partners relationship

2009

16

Be Fair & Respect

Establish Common Interests: and Take for more value

Develop Understanding: Building Long-term trust 1

2

3

How to effectively establish Collaboration

with Japanese Partners

Maintain Relationship: Encourage clear communication between partners 4

17

Agenda

SCG Corporate Growth Strategies

Collaborative relationship with Japanese partners

Doing Business with Japan in the future

SCG’s view on investing in Japan

18

Despite matured market, Japan is still attractive market

717.8

774.8

HokkaidouTohoku Region

Turkey

602.5

660.8

KyuushuuRegion

Switzerland

355.3

345.7

ChyuugokuRegion

Thailand

175.3

159.5

ShikokuRegion

NewZealand

2530

2428.7

KantouRegion

UnitedKingdom

930.4

836.8

ChyuubuRegion

Netherlands

981

1116.2

Kinki Region Korea

Unit: 1Bn USD

Quick Fact (2013)

• Population: 127.3 million

• GDP (Bn USD): 4901.5

• Per capita GDP (USD): 38,491

19

Source: Talk to JETRO First about business in Japan!

A role model for innovation-driven economy

Source: Global Competitiveness Report 2014 – 2015 (WEF)

The key driver for this high ranking are

• Its business sophistication (1st rank)

• Innovation factors (4th rank)

Japan exceed average advanced economies in

most aspects of development

This effectively showed that Japan

is innovation-driven economy

20

Japan has good history regarding innovation

Source: Talk to JETRO First about business in Japan!

Comparison of R&D Expenditure among G8 countries

Highest amount of

R&D expenditure in

G8 group

Relatively low number of

lawsuits related to IP

(patents, utility models,

designs) in Japan, the US,

and China

21

Japanese Yen is depreciating

Depreciating JPY will help Thai corporates

in investing in Japan

(more than 10% decrease in last twelve

months)

22

Source: www.Bloomberg.com

Thailand is following aging society path of Japan

Japan working age population is declining

since 2000

…and Thailand is going in the same path

in the years to come

Hence, Thailand can learn how to cope with aging society from Japan

23

Agenda

SCG Corporate Growth Strategies

Collaborative relationship with Japanese partners

Doing Business with Japan in the future

SCG’s view on investing in Japan

24

Our take on investing in Japan

• Looking for value company – one that fits our strategic

rationales

– Acquiring medium – or small – sized technology companies

– Collaborating to extend technology in ASEAN

• SCG’s case studies of investing in technology firms in

developed countries (but with some issues of culture

differences)

– GTC - Technology firm in the USA

– Lysando – Technology start-ups in Liechtenstein

– Norner – Pool of R&D expertise and chemicals IPs

– Centre of Excellence in Chemistry at University of Oxford

25

SCG’s 25% acquisition of GTC Technology USA in Oct 2009

… a leapfrog to increase technology business capability for SCG Chemicals

GTC Management

25%

25%

50%

Business Overview

• Technology Licensing - Petrochemicals: BTX Extraction,

Styrene Process, C5’s

- Refinery: Light naphtha isomerization

• Engineering Services - Basic engineering packages

- Front-end engineering design

• Process Equipment Technology - Process design for optimization

- Distillation tray design

• Chemicals & Catalysts - For GTC-licensed technologies such

as xylene

isomerization catalyst and chemical

absorbers

Collaborative Programs of SCG-GTC

• Co-development of R&D such

as new aromatic extraction

technology for petrochemical

process

• Employee exchange program

• Bi-annual technical committee for technology update

26

Invest in New Growth Area - Biotechnology

Partnering with Global high-technology business start up

Deal completed 2013

Functional Protein

Antimicrobial Property

Strong IP portfolio

Technical Consultants:

• Gifu University (Japan)

• KU Leuven (Belgium)

• Several non-disclosure partners

27

Acquiring Technology Leading Organization

key enabler to uplift R&D competency for petrochemical

• Spun-off R&D from Borealis (top 5

polyolefins producer) since 2007

• 50 scientists and researchers with avg. 35

years experience, including 10 Ph.D

• Integrated R&D facilities including plastic

conversion machine

• More than 400 customers base worldwide

Ideation Concept Generation

Product Development

Commercialization

Technology Development

Deal completed 2014

28

Access to Large Pool of World Class Researchers

Setting up Center of Excellence to pursue breakthrough technologies

Centre of Excellence in Chemistry

• 4 Professors

• 10 Researchers

• 18 Patent applications

(10% of University of Oxford filing last year)

Polymerization Catalyst

Nano-materials

New to the world

ligand

New platform for

polymerization

This platform is under

testing by SCG

Leverage opportunity

in specialty market

such as catalyst.

1st Pilot plant will start

up at the end of 2016

SCG Innovation Fund

Capture early stage of

new breakthrough

11 proposals have

been granted last year

29

… We Think of Japan as

• More collaborative opportunities in the closer time zone

– Even a chance to establish exchange program between employees in

Thailand and Japan

• Higher chance to engage in long-term relationship

• Less different culture

• Opportunities to set up center of excellence

• Leverage competent human resource pool to expand business

both within and outside Japan

30

In Summary…

Attractive market with

strong competitiveness

Strong R&D and

innovation record

Depreciating Yen will make

it easier to invest in Japan

Capture opportunities

for future of Thailand

There are no other times in the

history that Japanese market is

more open than it’s now.

31

Thank You

32